CAN THE COMPANY ACHIEVE PROFITABILITY THROUGH THE APPLICATION OF CAPITAL STRUCTURE FORMULATIONS? A CASE STUDY OF COMPANIES REGISTERED WITH THE JAKARTA ISLAMIC INDEX / JII
Capital structure is an integral combination of third party funding flows with internal capital that is fully used to finance the company's operational activities. Capital structure theory is important to analyze because it can affect the amount of capital costs paid. The measurement of capital...
| Main Authors: | , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
iVolga Press
2020-03-01
|
| Series: | Russian Journal of Agricultural and Socio-Economic Sciences |
| Subjects: | |
| Online Access: | https://rjoas.com/issue-2020-03/article_11.pdf |
| _version_ | 1827830650777894912 |
|---|---|
| author | Zein A.B. Alexandri M.B. Suryanto |
| author_facet | Zein A.B. Alexandri M.B. Suryanto |
| author_sort | Zein A.B. |
| collection | DOAJ |
| description | Capital structure is an integral combination of third party funding flows with internal capital that is fully used to finance the company's operational activities. Capital structure theory is important to analyze because it can affect the amount of capital costs paid. The measurement of capital structure in this study uses Debt to Total Assets (DAR) to assess the composition of debt in corporate funding and Debt to Equity Ratio (DER) which reflects the combination of debt and own capital. Profitability shows the company's ability to generate profits. Profitability ratios are used to measure the company's performance in generating profits. Return on Equity (ROE) reflects the company's performance based on the perspective of the shareholders. In sharia-based business classifications, measuring the effect of capital structure on company profitability is very interesting to study. The application of sharia principles in countries with the largest Muslim population in the world has experienced significant development. The concept of economic sharia is not only seen as a religious identity that is inclusive, but has become an important alternative worth considering besides the secular business model. This study aims to determine the extent to which capital structure affects the profitability of companies that meet the best sharia and economic criteria on the Indonesia Stock Exchange (IDX). The best companies are listed in the Jakarta Islamic Index (JII). There are 17 companies included in the criteria of this study in the period 2012 to 2017. The method used in this study is multiple regression analysis. The results showed that DAR had a significant negative effect on ROE. Whereas DER has a significant positive effect on profitability as measured by ROE. Simultaneously, the measurement variable Capital Structure, namely DAR and DER significantly influences profitability as measured by ROE. |
| first_indexed | 2024-03-12T04:32:22Z |
| format | Article |
| id | doaj.art-f3643f0449c044c4bc5547228775828f |
| institution | Directory Open Access Journal |
| issn | 2226-1184 |
| language | English |
| last_indexed | 2024-03-12T04:32:22Z |
| publishDate | 2020-03-01 |
| publisher | iVolga Press |
| record_format | Article |
| series | Russian Journal of Agricultural and Socio-Economic Sciences |
| spelling | doaj.art-f3643f0449c044c4bc5547228775828f2023-09-03T10:01:01ZengiVolga PressRussian Journal of Agricultural and Socio-Economic Sciences2226-11842020-03-019939210210.18551/rjoas.2020-03.11CAN THE COMPANY ACHIEVE PROFITABILITY THROUGH THE APPLICATION OF CAPITAL STRUCTURE FORMULATIONS? A CASE STUDY OF COMPANIES REGISTERED WITH THE JAKARTA ISLAMIC INDEX / JIIZein A.B.0Alexandri M.B.1Suryanto2Postgraduate Program of Business Administration, Faculty of Social and Politic Science, University of PadjadjaranPostgraduate Program of Business Administration, Faculty of Social and Politic Science, University of PadjadjaranPostgraduate Program of Business Administration, Faculty of Social and Politic Science, University of PadjadjaranCapital structure is an integral combination of third party funding flows with internal capital that is fully used to finance the company's operational activities. Capital structure theory is important to analyze because it can affect the amount of capital costs paid. The measurement of capital structure in this study uses Debt to Total Assets (DAR) to assess the composition of debt in corporate funding and Debt to Equity Ratio (DER) which reflects the combination of debt and own capital. Profitability shows the company's ability to generate profits. Profitability ratios are used to measure the company's performance in generating profits. Return on Equity (ROE) reflects the company's performance based on the perspective of the shareholders. In sharia-based business classifications, measuring the effect of capital structure on company profitability is very interesting to study. The application of sharia principles in countries with the largest Muslim population in the world has experienced significant development. The concept of economic sharia is not only seen as a religious identity that is inclusive, but has become an important alternative worth considering besides the secular business model. This study aims to determine the extent to which capital structure affects the profitability of companies that meet the best sharia and economic criteria on the Indonesia Stock Exchange (IDX). The best companies are listed in the Jakarta Islamic Index (JII). There are 17 companies included in the criteria of this study in the period 2012 to 2017. The method used in this study is multiple regression analysis. The results showed that DAR had a significant negative effect on ROE. Whereas DER has a significant positive effect on profitability as measured by ROE. Simultaneously, the measurement variable Capital Structure, namely DAR and DER significantly influences profitability as measured by ROE.https://rjoas.com/issue-2020-03/article_11.pdfcapital structuredebt assets ratio (dar)debt equity ratio (der)profitabilityecononic shariastock exchangereturn on equity (roe) |
| spellingShingle | Zein A.B. Alexandri M.B. Suryanto CAN THE COMPANY ACHIEVE PROFITABILITY THROUGH THE APPLICATION OF CAPITAL STRUCTURE FORMULATIONS? A CASE STUDY OF COMPANIES REGISTERED WITH THE JAKARTA ISLAMIC INDEX / JII Russian Journal of Agricultural and Socio-Economic Sciences capital structure debt assets ratio (dar) debt equity ratio (der) profitability econonic sharia stock exchange return on equity (roe) |
| title | CAN THE COMPANY ACHIEVE PROFITABILITY THROUGH THE APPLICATION OF CAPITAL STRUCTURE FORMULATIONS? A CASE STUDY OF COMPANIES REGISTERED WITH THE JAKARTA ISLAMIC INDEX / JII |
| title_full | CAN THE COMPANY ACHIEVE PROFITABILITY THROUGH THE APPLICATION OF CAPITAL STRUCTURE FORMULATIONS? A CASE STUDY OF COMPANIES REGISTERED WITH THE JAKARTA ISLAMIC INDEX / JII |
| title_fullStr | CAN THE COMPANY ACHIEVE PROFITABILITY THROUGH THE APPLICATION OF CAPITAL STRUCTURE FORMULATIONS? A CASE STUDY OF COMPANIES REGISTERED WITH THE JAKARTA ISLAMIC INDEX / JII |
| title_full_unstemmed | CAN THE COMPANY ACHIEVE PROFITABILITY THROUGH THE APPLICATION OF CAPITAL STRUCTURE FORMULATIONS? A CASE STUDY OF COMPANIES REGISTERED WITH THE JAKARTA ISLAMIC INDEX / JII |
| title_short | CAN THE COMPANY ACHIEVE PROFITABILITY THROUGH THE APPLICATION OF CAPITAL STRUCTURE FORMULATIONS? A CASE STUDY OF COMPANIES REGISTERED WITH THE JAKARTA ISLAMIC INDEX / JII |
| title_sort | can the company achieve profitability through the application of capital structure formulations a case study of companies registered with the jakarta islamic index jii |
| topic | capital structure debt assets ratio (dar) debt equity ratio (der) profitability econonic sharia stock exchange return on equity (roe) |
| url | https://rjoas.com/issue-2020-03/article_11.pdf |
| work_keys_str_mv | AT zeinab canthecompanyachieveprofitabilitythroughtheapplicationofcapitalstructureformulationsacasestudyofcompaniesregisteredwiththejakartaislamicindexjii AT alexandrimb canthecompanyachieveprofitabilitythroughtheapplicationofcapitalstructureformulationsacasestudyofcompaniesregisteredwiththejakartaislamicindexjii AT suryanto canthecompanyachieveprofitabilitythroughtheapplicationofcapitalstructureformulationsacasestudyofcompaniesregisteredwiththejakartaislamicindexjii |